Does economic inequality undermine the efficient use of natural resources? Evidence from Chinese provinces (2011–2020)

This study investigates the relationship between income inequality and the efficient use of natural resources in China, emphasizing the need to optimize resource utilization amid rapid economic development and increasing social disparities. Using panel data from 30 Chinese provinces spanning 2011 to 2020, the research aims to explore how income disparities affect foreign direct investment (FDI) and, in turn, the efficiency of natural resource usage. The study employs a two-way fixed effects model alongside robustness checks, instrumental variable regression, and threshold analysis to ensure empirical validity. Key findings reveal a significant negative relationship between income inequality and resource use efficiency, with green fiscal policies (GFP) and industrial agglomeration (IA) serving as effective moderating variables. The analysis also identifies a threshold effect of technological progress: at lower levels, inequality hampers resource efficiency, while beyond a certain threshold, innovation offsets its negative impact. Heterogeneity analysis confirms that regions with stronger green innovation capacity and higher resource endowments experience different magnitudes of inequality’s effect on FDI. Additionally, infrastructure (OR) positively influences FDI, while excessive foreign investment and natural resource reliance tend to undermine efficiency. The study suggests that integrating green fiscal frameworks and promoting industrial clustering can mitigate the adverse effects of inequality on sustainable development.